BUSN2101 Chapter Notes - Chapter 15-16: Investment Fund, Fiduciary, Financial Services
Ch 15 Consequences of Breach of Duty
Statutory duties: enforced by ASIC
General law duties: enforced by the company, but in some circumstances an individual member is
able to bring legal action on behalf of the company against the director or directors
Statutory remedies: allow individual members to commence legal action in certain circumstances
including breaches of directors’ duties, although the circumstances are not limited to breaches of
directors’ duties
Enforcement of Directors’ Duties by ASIC
• Corporation/ managed investment scheme civil penalties: ss180-183, s 209, s254L(2), s
256D(3), s 259F(2), s 260(2), s 344(1), s 588G, ss 601, ss 674-675
• Financial services civil penalties: ss 985, s 1041A, ss 1041B(1) and 1041C(1), s 1041D, ss 1043
(1) and (2), cl 29(6) of Sth 4
• pecuniary penalty up to $200,000 if the contravention of a corporation/ scheme civil
provision :
o materially prejudices the interests of the company or its members, or
o materially prejudices the company’s ability to pay its creditors, or
o is serious: 1317G
• pecuniary penalty up to $200,000 to up to $1m if the contravention of a financial services civil
penalty provision:
o materially prejudices the interests of acquirers or disposers of the relevant financial
products, or
o material prejudices the issuer of the relevant financial products or, if the issuer is a
corporation or scheme, the members of that corporation or scheme, or
o is serious
• disqualification order: s 206C-> in determining whether the disqualification is justified, the
court may have regard to:
o the person’s conduct in relation to the management, business or property of any
company
o any other matters that the court considers appropriate
• Compensation order: s 1317H
Criminal penalties:
• s 181: a director or other officer commits an offence and can be subject to criminal penalties if
they are reckless or intentionally dishonest and fail to act:
o in good faith in the best interests of the company, or
o for proper purpose s184
• s 182: the duty not to make improper use of position-> subject to criminal penalties if they use
their position dishonestly:
o with the intention of directly or indirectly gaining an advantage for themselves, or
someone else, or causing detriment to the company, or
o recklessly as to whether the use may result in themselves or someone else directly or
indirectly gaining an advantage, or in causing detriment to the company s 184(2)
• s 183: the duty not to make improper use of information-> subject to criminal penalties if they
use their information dishonestly:
o with the intention of directly or indirectly gaining an advantage for themselves, or
someone else, or causing detriment to the company, or
o recklessly as to whether the use may result in themselves or someone else directly or
indirectly gaining an advantage, or in causing detriment to the company s 184(3)
• s 588G (3): the duty to prevent insolvent trading -> can be subject to criminal penalties if:
o the company was insolvent when it incurred the debt or became insolvent by incurring
the debt, and
Document Summary
General law duties: enforced by the company, but in some circumstances an individual member is able to bring legal action on behalf of the company against the director or directors. Statutory remedies: allow individual members to commence legal action in certain circumstances i(cid:374)(cid:272)ludi(cid:374)g (cid:271)rea(cid:272)hes of dire(cid:272)tors" duties, although the (cid:272)ir(cid:272)u(cid:373)sta(cid:374)(cid:272)es are (cid:374)ot li(cid:373)ited to (cid:271)rea(cid:272)hes of dire(cid:272)tors" duties. E(cid:374)for(cid:272)e(cid:373)e(cid:374)t of dire(cid:272)tors" duties (cid:271)y asic: corporation/ managed investment scheme civil penalties: ss180-183, s 209, s254l(2), s. 256d(3), s 259f(2), s 260(2), s 344(1), s 588g, ss 601, ss 674-675. It is however, impossible for the company to indemnify the officer for the breach of duty. The society was therefore, ordered to purchase the shares of the two individual members at a price decided by the court. This is because of their broken down relationship: brea(cid:272)hes of dire(cid:272)tors" duties: re spargos the court held that these actions of directors of both spargos and enterprise constituted oppression.
